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Student Loan Agreement: Not Such a Good Deal?

The bill prevents the interest from being variable, but it doesn't stop the interest rate from increasing drastically

By La Opini??n Editorial Staff
Published on LatinoLA: July 26, 2013


Student Loan Agreement: Not Such a Good Deal?


Originally published at La Opini??n. Republished by permission.

Thanks to a Senate deal, the drastic interest rate increase on student loans will return to where it was before July 1. This brings relief to students who will soon begin their semesters but raises a question about the end purpose of these loans.

Interest rates on these loans had doubled. The bipartisan deal achieved in the Senate retroactively sets these rates at 3.9% for undergraduates and 5.4% for graduate students. In addition to the decrease, the agreement linked the interest rate to Treasury bonds and established caps on the rates, 8.25% for undergraduates and 9.5% for graduates.

For Washington to have felt it was urgent to act quickly, after the embarrassment of being unable to prevent the increases from entering into effect in the first place, is a good thing. However, this Senate agreement has a price; that is why it has been received with open arms in the House of Representatives.

The bill at least prevented the interest from being variable, like it was proposed in the measure the House approved. Nevertheless, it does not stop the interest rate from increasing drastically in a few years.

We have previously said that the purpose of these loans is to help students, who according to official numbers, already had $1 trillion in debt last year. On the other hand, the bill drafted by the lower chamber is more a measure to collect money instead of one to help students.

The House leadership staunchly opposes tax changes that are not revenue neutral, meaning that collecting a tax does not represent additional revenue flowing into federal coffers. But they have no problem with wanting to collect $715 million in interest from students over the next decade.

We hope that the next reauthorization of the Higher Education Act, which will begin soon, repositions the role of the federal government to become a real help and invests in students instead of attempting to solve the national debt by further burdening them.

Do you have a student loan? How will this new deal help or hurt your?

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